Here's our summary of key economic events overnight that affect New Zealand, with news we are less than a week away from another potential US federal government funding shutdown.
But first up today, we can report American August data for new home sales has surprised everyone and jumped a very sharp +20% from July to an annualised rate of 800,000. Few saw this coming. Analysts say sharp discounting and widespread promotional offers are behind the twist because the unsold inventories were mounting. But the gains were widespread especially in the Northeast (+72%). Or it could just be rogue data.
And that is because we had not seen any recent trend in rising mortgage application levels to support such a big August jump. In fact last week's application levels were dominated by refinance activity, not new home purchase applications. The discrepancy between the two data releases is a curiosity.
There was another well-supported US Treasury bond auction earlier today, this one for their 5-year Note. The median yield came in at 3.65%, little-changed from the 3.67% at the prior equivalent event.
Taiwanese industrial production rose in August by +14.4% from a year ago, slowing from an upwardly revised +18.7% gain in the previous month. Taiwan seems to deliver a never-ending stream of double-digit economic advances. It has to be the world's most impressive economy at present.
Hong Kong has now shifted to clean-up mode now that Super-Typhoon Ragasa has moved on. There is a lot to restore. It has made landfall in southern China now, where 2 mln people have been evacuated. Ragasa is 2025's largest storm globally and is the largest since the all-time records set by Super Typhoon Haiyan in 2013, the most powerful tropical cyclones ever recorded. (Hurricanes, typhoons and cyclones are all the same, just named differently based on where they develop from.)
Moving on, yesterday's release of the August monthly CPI indicator series in Australia shows that inflations pressures are still alive - and rising. They came in at 3.0%, the most in more than a year. But they have a 1-3% target range so it is technically within that range. The trajectory will worry the RBA all the same. And financial markets have pushed back their expectations of when the RBA will cut rates next.
In Indonesia, the combination of an accident at a major copper mine that has closed it completely, and in Peru, a closure over a tough political dispute, has seen copper prices jump overnight.
In Russia, that are raising their GST to 22% to pay for their war on Ukraine.
In the US, attention is twisting back to lending, liquidity and credit-rating standards as two major financials collapse in a reprise of the GFC sub-prime mistakes. Both Tricolor (a Texas car loan lender) and First Brands (a car parts maker) recently had good credit ratings confirmed.
And tariffs, rising joblessness, and weird public policy make the globally important US economy unusually vulnerable at present. So we should note that a US Federal Government shutdown seems on the cards as Trump seems not to care. One of these types of events could trigger something to seriously unnerve financial markets - the US not paying its bills could be it (and is unlikely to be seen as "just another Trump bankruptcy".)
The UST 10yr yield is now at 4.15%, up +3 bps from yesterday at this time. The key 2-10 yield curve is now at +54 bps. Their 1-5 curve is positive by +7 bps. And their 3 mth-10yr curve is now +5 bps positive. The China 10 year bond rate is now at 1.89%, up +1 bp. The Australian 10 year bond yield starts today at 4.33, up +7 bps. The NZ Government 10 year bond rate starts today at just under 4.22%, and down -3 bps from yesterday.
Wall Street is lower again today with the S&P500 down another -0.4%. European markets were mixed between Frankfurt's +0.2% and Paris's -0.6%. Tokyo ended its Wednesday session up +0.3%. Hong Kong was up +1.4% but Shanghai was down -0.3%. Singapore also fell -0.3%. The ASX200 ended with a -0.9% retreat but the NZX50 ended with a +0.3% gain.
The price of gold will start today at US$3733/oz, down -US$48 from yesterday. Silver was lower too and now under US$44/oz.
American oil prices are up +US$1.50 at just under US$65/bbl, with the international Brent price now just over US$69/bbl.
The Kiwi dollar is at just on 58.1 USc and down -50 bps from yesterday and that is its lowest level since mid-April. Against the Aussie we are also down -50 bps at 88.3 AUc and near a three-year low. Against the euro we are down -30 bps at 49.5 euro cents. That all means our TWI-5 starts today at just over 65.5, and down another -30 bps.
The bitcoin price starts today at US$113,858 and up +1.7% from this time yesterday. Volatility over the past 24 hours has again been modest at just over +/- 1.1%.
Today, all eyes will be on the big Fonterra announcements, which are expected to be very positive. Join us for our coverage that will start with their NZX market releases soon.
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9 Comments
Trump is finally appearing to start playing hardball with Russia. Will it last - who knows? It does seem that he has some vulnerability there. But if Russia loses and Putin is gone, then that vulnerability is gone too (possibly). But putting their GST up to 22% will hurt Russians, reducing Putin's popularity and further forcing increased policing of their population as they protest (if they dare).
Putin is testing NATO and all this is important. He is likely confident of NKs support but what of China? Zelensky is right that it will never be cheaper than to stop Putin now. It was cheapest in February 2022.
Too many maybes. What will Putin do when he is forced to the wall?
Russia with inexplicable disregard for their own hard won history, by attacking Ukraine south to north, has forced itself into an attritional war but so far at least, nothing has put a stop to that progress albeit it slow and costly. Russia only understands and respects force, and until they face some opposition with effective offensive capability, the machine will simply continue to munch along. As far as Putin is concerned he has no other option. Recent enough failures, Khrushchev and Cuba, Brezhnev and Afghanistan spell out the consequences otherwise. But in the meantime the Russian people will make do as they are told, as they have done for centuries of suffering. Putin has the security apparatus established by the Tsars, perfected by the Bolsheviks, at his disposal and it should be well realised by now, that Russia can only be changed by Russians.
Kruschev got the missiles removed from Turkey
Cuban Missile Crisis - Wikipedia -
'The compromise embarrassed Khrushchev and the Soviet Union because the withdrawal of US missiles from Italy and Turkey was a secret deal between Kennedy and Khrushchev, and the Soviets were seen as retreating from a situation that they had started.'
Propaganda - the US do Bernays better than anyone.
Admittedly I had to go to Google to correctly spell Nikita’s name. He came up the hard road. Colourful character by international standards of the time. The banging of his shoe at the UN Assembly for which PM Macmillan famously asked for a translation. Recommend Bob Newhart’s “The Khrushchev Visit.”
Should have happened years ago murray86, but about time. One wonders if the Pentagon isn't pushing in the back ground and finally has broken into Trumps tiny brain. Still Trump is all over the place so who knows.
A response to the Financial Times: A few points of clarification about degrowth – Timothée Parrique
'Again, if there is one thing you need to remember from this, it is that reducing greenhouse gases is not enough. This monomania with carbon creates a false sense of possibility, assuming that the trends we observe for emissions in a handful of countries could be generalised to the world for all environmental pressures. It cannot. When we factor in all the relevant environmental indicators, we realise something unsurprisingly simple: when an economy grows, it gets bigger.'
Another thing you need to remember about degrowth is that is luddite quackery. If anyone uses the term back away slowly.
"In the last decade many publications have appeared on degrowth as a strategy to confront environmental and social problems. We undertake a systematic review of their content, data and methods. Based on a sample of 561 studies we conclude that: (1) content covers 11 main topics; (2) the large majority (almost 90%) of studies are opinions rather than analysis; (3) few studies use quantitative or qualitative data, and even fewer ones use formal modelling; (4) the first and second type tend to include small samples or focus on non-representative cases; (5) most studies offer ad hoc and subjective policy advice, lacking policy evaluation and integration with insights from the literature on environmental/climate policies; (6) of the few studies on public support, a majority concludes that degrowth strategies and policies are socially-politically infeasible; (7) various studies represent a “reverse causality” confusion, i.e. use the term degrowth not for a deliberate strategy but to denote economic decline (in GDP terms) resulting from exogenous factors or public policies; (8) few studies adopt a system-wide perspective – instead most focus on small, local cases without a clear implication for the economy as a whole."
https://www.sciencedirect.com/science/article/pii/S0921800924002210
Coming from a true believer.
Truth(s) are provable from first principles.
How to respond to societal collapse | Sarah Wilson | TEDxSydney
About minute 8, for you, Profile.
Depletion of a finite resource is depletion of a finite resource. Truth. Fact.
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